Alex Salmond can do no wrong after biggest victory margin in Scottish political history

The scale of the Nationalists' win is so great that Labour might never recover, with profound consequences not only in Holyrood but in Westminster. Independence for Scotland and the end of the United Kingdom suddenly seems possible

The Jam House is as cool as it gets in Edinburgh. It's a smart wine bar housed in the BBC's old east-coast outpost with a self-conscious food menu and live music. On Friday night it hosted the SNP's post-election victory party but, as few had slept for 48 hours, there was little dancing and jumping.

The scale of the victory was foreseen by none of them, and seemed to have left many dazed and confused. Indeed, the forces that altered Scotland's political landscape on Thursday were almost supernatural – no one would have believed them possible.

From whatever angle you chose to observe it, the SNP's triumph was historic and record-breaking: the first time the party had won back-to-back polls; the biggest margin of victory in modern Scottish politics; Labour's worst result in Scotland in 80 years. Indeed, one party activist got a little carried away when he said: "If this had been first-past-the-post we'd have won 130 seats." There are only 129 up for grabs, but you knew what he meant.

The Scottish electoral system relies on an intricate formula combining first-past-the-post and alternative voting to ensure that results like this should never happen. The SNP's 69 seats crashed the system, and it remains to be seen if the Scotland Act may be further calibrated to stop it happening again – though the bad news for Labour in Scotland is that it will happen again unless Ed Miliband acts quickly and decisively to take control of a devastated and broken party north of the border.

Until Friday morning, everyone knew where Labour's heartlands were to be found: Glasgow, Lanarkshire and parts of north Ayrshire. Not any more; these redoubts were destroyed by the SNP juggernaut. It was as if a mass political hypnotism had taken place. "Look into my eyes; you shall vote for the SNP."

Yet the mood on Friday night among the hundreds of (very young) party workers and activists was cautious. They clung to the brief issued from the central campaign office: no triumphalism, no jingoism – now is a time for healing and understanding. One campaign manager said: "We want to win hearts and minds and reach out to those supporters of other parties who voted for us."

Maggie Lennon, a businesswoman from Glasgow's West End, is a lifelong Labour supporter but was happy to vote SNP. Her formerly Labour constituency was one of several in the party's Glasgow fortress that fell.

"I admired their guts in refusing to opt for an easy life by entering a coalition. Nor did they make a mess of things in difficult circumstances. And frankly, I was insulted by Labour trying to run a Westminster campaign in Scotland.

"We know that the coalition must be opposed, and that is why we all voted Labour last year for the Westminster election. But this is a Scottish election with Scottish issues."

Earlier on Friday evening, the SNP activists had risen to acclaim their dear leader, who arrived at the venue in a helicopter. "We will govern fairly and wisely with an eye to the future and a heart to forgive," said Alex Salmond.

Perhaps he might have felt like saying: "The United Kingdom is over and we'll be free in three years." For if the impressive SNP machine truly dedicates itself to full independence, who is in a position to stop it? Not the Scottish Labour party, as things stand.

No glasses were raised on Friday to one of the real architects of their devastating success: Donald Dewar, the celebrated Labour senior statesman and the man who drove through devolution. It might be seen now – especially by Labour people – as a catastrophic error of judgment to hand devolution to the Scottish people. It certainly played into the hands of the SNP last week, as Salmond smiled the smile of a black widow spider whose prey has just entered her bedchamber.

From that evening in 1997, when Dewar clenched his fist in triumph at success in the devolution referendum, it was perhaps only a matter of time before this day would arrive. That it took only 14 years should be no surprise to those of us who have observed the rapid decline of the Labour party in Scotland.

Dewar claimed devolution was the settled will of the Scottish people. Others would argue that it was no such thing, and that devolution was more of a job creation exercise for second and third-rate politicians who would never have been considered by their party good enough for Westminster.

Whatever the rights and wrongs of Dewar's party management 14 years ago, most observers agree that Labour ran a wretched campaign this time round.

The parliamentary party is derided by its SNP opponents on a daily basis. The party of separation is a lean, ferociously disciplined and committed force with a leader who is treated with almost messianic reverence.

Aileen Colleran, one of the most influential Labour councillors in Glasgow, was dismayed by the timbre of the Labour campaign: "We came across as tribal, and with an obsessive hatred of the SNP, when they are a democratic, left-of-centre party like ourselves. They were able to rise above that. And how did we allow ourselves to be painted into a corner of defending the union when we have actually done more for Scotland than any other party?"

It was the mass transference of support from the Lib Dems to the SNP that made their overall majority possible. Labour should have seen that coming. Why would disaffected Liberals be inclined to give their protest votes to a Labour party that has abused them at every turn since last May?

Salmond though, will be wise to resist calls for an early referendum on independence. In the final televised leaders' debate last week, he said that a referendum would not happen until the latter part of his term in government. In the meantime he can go to David Cameron and seek increased tax powers in the Scotland Act.

The First Minister can hardly lose. If Cameron refuses to cede significant ground, then Salmond will add that to his arsenal of firepower in the independence debate. If he does get what he's looking for, he can go to the Scottish people and say: "Look at the fiscal powers we already have. We're using them wisely, now let's all take a deep breath and go the whole way."

Most of the unionist voters who handed Salmond his triumph believe, perhaps naively – given how demoralised is Scottish Labour – that a majority of Scots will always be opposed to separation.

This is the biggest test yet of Miliband's leadership, at least in Scotland. Labour supporters feel he needs to take a grip of his Scottish standard before it slips away for ever and only the ghosts of Dewar, Smith, Reid and Robertson remain.

• The following correction was printed in the Observer's For the Record column, Sunday 15 May 2011. This article said the late Donald Dewar had claimed "devolution was the settled will of the Scottish people". While Dewar argued that principle, it was the late Labour leader John Smith who coined the phrase.